The US government is weighing restrictions or a ban on diesel exports to increase domestic supply as fuel prices climb. The national average is close to $6.45 a gallon. Limits could offer some short-term relief to US consumers, but buyers in Latin America and Europe may face tighter supply and higher costs that could feed into transport, food and industrial prices.
US ships 1.2 million to 1.5 million barrels of diesel a day
The US Energy Information Administration says American refineries produce about 4 million to 5 million barrels of diesel a day, while domestic consumption averages roughly 3.6 million barrels. Most of the surplus is exported, making the US a significant supplier to global diesel markets.
About 60% to 70% of US diesel exports go to Latin America. Mexico, Brazil, Chile and Ecuador rely on these shipments to fuel transport, agriculture and manufacturing. European markets, including France, the Netherlands and the UK, also import US diesel to supplement supplies from other sources.
Higher diesel prices are feeding into transport costs
US diesel prices have risen nearly 70% year over year and at one point topped $6.50 a gallon. Tensions in the Middle East and disruptions to shipping through the Strait of Hormuz have put pressure on global energy supplies. The strait typically carries about one-fifth of the world's oil and gas shipments.
Diesel powers US freight trucks, farm equipment and freight trains. Rising fuel bills increase the cost of moving goods and can ultimately push up prices for food, construction projects and other products. In the UK, retail diesel prices have also reached a record, drawing attention to logistics costs and household budgets. UK Chancellor John Healey said the country is consulting with the US over potential export restrictions and preparing for the possibility. France and other parts of continental Europe are also contending with the cost-of-living effects of higher fuel prices.
Export curbs could lower US prices but raise costs abroad
Republican lawmakers Ashley Hinson and Dan Sullivan, who support export restrictions, argue that keeping US energy at home during a disruption to overseas supply would help protect domestic consumers and businesses. The proposal is intended to leave more diesel in the US market and ease pressure on drivers, freight companies and other fuel-intensive industries.
David Fyfe, chief economist at Argus Media, warned that a reduction in US exports could quickly lift international prices. If more than 1 million barrels a day were removed from export markets, importers in Latin America and Europe would compete for alternative supplies. That could increase global freight, food and industrial costs and add to inflationary pressure. Fyfe also said the move could damage the US reputation as a reliable energy supplier.
Sarah Lafleur, an analytics manager at Argus Media, said higher international prices could eventually curb demand, but near-term supply gaps would strain trade relationships and speed the pass-through of costs across the global economy. Whether export limits will be imposed, how broadly they would apply and how much additional domestic supply would reduce prices for end users remain unclear.